Question

the common stock of flavorful teas has an expected return of 16.15 percent. the return on the market is 13 percent and the risk-free rate of return is 2.5 percent. what is the beta of this stock? group of answer choices 5.5 1.3 1.17 0.65 0.77

Answer 1

Using the Capital Asset Pricing Model (CAPM) formula, we can calculate the beta of the stock:

Beta = (Expected return - Risk-free rate) / Market return - Risk-free rate)
Beta = (16.15% - 2.5%) / (13% - 2.5%)
Beta = 1.3

Therefore, the beta of the stock is 1.3. The answer is B. 1.3.